Correlation Between Southern California and Genesis Energy
Can any of the company-specific risk be diversified away by investing in both Southern California and Genesis Energy at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Southern California and Genesis Energy into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Southern California Gas and Genesis Energy LP, you can compare the effects of market volatilities on Southern California and Genesis Energy and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Southern California with a short position of Genesis Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of Southern California and Genesis Energy.
Diversification Opportunities for Southern California and Genesis Energy
0.25 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Southern and Genesis is 0.25. Overlapping area represents the amount of risk that can be diversified away by holding Southern California Gas and Genesis Energy LP in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Genesis Energy LP and Southern California is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Southern California Gas are associated (or correlated) with Genesis Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Genesis Energy LP has no effect on the direction of Southern California i.e., Southern California and Genesis Energy go up and down completely randomly.
Pair Corralation between Southern California and Genesis Energy
Assuming the 90 days horizon Southern California Gas is expected to generate 1.25 times more return on investment than Genesis Energy. However, Southern California is 1.25 times more volatile than Genesis Energy LP. It trades about 0.03 of its potential returns per unit of risk. Genesis Energy LP is currently generating about -0.07 per unit of risk. If you would invest 2,580 in Southern California Gas on September 3, 2024 and sell it today you would earn a total of 77.00 from holding Southern California Gas or generate 2.98% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Southern California Gas vs. Genesis Energy LP
Performance |
| Timeline |
| Southern California Gas |
| Genesis Energy LP |
Southern California and Genesis Energy Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Southern California and Genesis Energy
The main advantage of trading using opposite Southern California and Genesis Energy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Southern California position performs unexpectedly, Genesis Energy can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Genesis Energy will offset losses from the drop in Genesis Energy's long position.| Southern California vs. Dynagas LNG Partners | Southern California vs. GasLog Partners LP | Southern California vs. GasLog Partners LP | Southern California vs. Genesis Energy LP |
| Genesis Energy vs. Brooge Holdings | Genesis Energy vs. Plains All American | Genesis Energy vs. Western Midstream Partners | Genesis Energy vs. Hess Midstream Partners |
Check out your portfolio center.Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the CEOs Directory module to screen CEOs from public companies around the world.
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